Cisneros v. Alpine Ridge Group

• Decision Date: 03 May 1993
• Docket Number: No. 92-551,92-551
• Parties: Henry G. CISNEROS, Secretary of Housing and Urban Development, et al., Petitioners v. ALPINE RIDGE GROUP et al
• Court: U.S. Supreme Court

508 U.S. 10

113 S.Ct. 1898

123 L.Ed.2d 572

Henry G. CISNEROS, Secretary of Housing and Urban Development, et al., Petitioners

v ALPINE RIDGE GROUP et al.

No. 92-551.

Argued March 30, 1993.

Decided May 3, 1993.

Syllabus ^*

The so-called Section 8 housing program under the United States Housing Act of 1937 (Housing Act) authorizes private landlords who rent to low-income tenants to receive "assistance payments" from the Department of Housing and Urban Development (HUD) in an amount calculated to make up the difference between the tenants' rent payments and a "contract rent" agreed upon by the landlords and HUD. Section 1.9b of the latter parties' "assistance contracts" provides that contract rents are to be adjusted annually by applying the latest automatic adjustment factors developed by HUD on the basis of particular formulas, while § 1.9d specifies that, "[n]otwithstanding any other provisions of this Contract, adjustments as provided in this Section shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by the Government. . . ." In the early 1980's, HUD began to conduct independent "comparability studies" in certain real estate markets where it believed that contract rents, adjusted upward by the automatic adjustment factors, were materially higher than prevailing market rates for comparable housing, and to use the private market rents as an independent cap limiting assistance payments. In this litigation, respondent Section 8 landlords allege that § 801 of the Department of Housing and Urban Development Reform Act of 1989 (Reform Act)—which, inter alia, authorizes HUD to limit future automatic rent adjustments through the use of comparability studies—violates the Due Process Clause of the Fifth Amendment by stripping them of their vested rights under the assistance contracts to annual rent increases based on the automatic adjustment factors alone. In separate lawsuits, the District Courts each granted summary judgment for respondents. The Court of Appeals affirmed the judgments in a consolidated appeal.

Held: This Court need not consider whether § 801 of the Reform Act unconstitutionally abrogated a contract right to unobstructed formula-based rent adjustments, since respondents have no such right. The assistance contracts do not prohibit the use of comparability studies to impose an independent cap on such adjustments. Indeed, § 1.9d's plain language clearly mandates that contract rents "shall not" be adjusted so as to exceed materially the rents charged for "comparable unassisted units" on the private rental market, "[n]otwithstanding" that § 1.9b might seem to require such a result. This limitation is consistent with the Housing Act itself, 42 U.S.C. § 1437f(c)(2)(C). Moreover, it is clear that § 1.9d—which by its own terms clearly envisions some comparison of assisted and unassisted rents—affords HUD sufficient discretion to design and implement comparability studies as a reasonable means of effectuating its mandate, since the section expressly assigns to "the Government" the determination of whether material rent differences exist. Respondents' contention that HUD's comparability studies have been poorly conceived and executed, resulting in faulty and misleading comparisons, is irrelevant to the question whether HUD had contractual authority to employ such studies at all. If respondents have been denied formula-based rent increases based on shoddy comparisons, their remedy is to challenge the particular study, not to deny HUD's authority to make comparisons. Pp. 1902-1905.

955 F.2d 1382 (CA9 1992), reversed.

WHITE, J., delivered the opinion for a unanimous Court.

Michael R. Dreeben, Washington, DC, for petitioners.

Warren J. Daheim, Tacoma, WA, for respondents.

Justice WHITE delivered the opinion of the Court.

The question presented in this case is whether § 801 of the Department of Housing and Urban Development Reform Act of 1989, 103 Stat. 2057, violates the Due Process Clause of the Fifth Amendment by abrogating respondents' contract rights to certain rental subsidies.

I

A.

In 1974, Congress amended the United States Housing Act of 1937 (Housing Act) to create what is known as the Section 8 housing program. Through the Section 8 program, Congress hoped to "ai[d] low-income families in obtaining a decent place to live," 42 U.S.C. § 1437f(a) (1988 ed., Supp. III), by subsidizing private landlords who would rent to low-income tenants. Under the program, tenants make rental payments based on their income and ability to pay; the Department of Housing and Urban Development (HUD) then makes "assistance payments" to the private landlords in an amount calculated to make up the difference between the tenant's contribution and a "contract rent" agreed upon by the landlord and HUD. As required by the statute, this contract rent is, in turn, to be based upon "the fair market rental" value of the dwelling, allowing for some modest increase over market rates to account for the additional expense of participating in the Section 8 program. See § 1437f(c)(1).

The statute, as originally enacted, further provided that monthly rents for Section 8 housing would be adjusted at least annually as follows:

established in the housing area for similar types and sizes of dwelling units or, if the Secretary determines, on the basis of a reasonable formula.

. . . . .

"(C) Adjustments in the maximum rents as hereinbefore provided shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by the Secretary." 42 U.S.C. §§ 1437f(c)(2)(A) and (C) (1982 ed.).

The respondents in this case are private developers who entered into long-term contracts with HUD—known as Housing Assistance Payments (HAP) Contracts or "assistance contracts"—to lease newly constructed apartment units to Section 8 tenants. Their contracts established initial contract rents for each unit and provided, consistent with the statutory authorization, that these rents would be adjusted regularly, on the basis of a reasonable formula, to keep pace with changes in rental values in the private housing market. Section 1.9b of their contracts provides:

"b. Automatic Annual Adjustments

"(1) Automatic Annual Adjustment Factors will be determined by the Government at least annually; interim revisions may be made as market conditions warrant. Such factors and the basis for their determination will be published in the Federal Register. . . .

"(2) On each anniversary date of the Contract, the Contract Rents shall be adjusted by applying the applicable Automatic Annual Adjustment Factor most recently published by the Government. Contract Rents may be adjusted upward or downward, as may be appropriate; however, in no case shall the adjusted Contract Rents be less than the Contract Rents on the effective date of the Contract." App. to Brief for Petitioners 8a.

The Automatic Annual Adjustment Factors to which the contracts refer are developed by HUD based upon market trends recorded by the Consumer Price Index and the Bureau of the Census American Housing Surveys.

Section 1.9d of the contracts, in part tracking the language of § 8(c)(2)(C) of the Housing Act, 42 U.S.C. § 1437f(c)(2)(C) (1988 ed., Supp. III), provides:

"d. Overall Limitation. Notwithstanding any other provisions of this Contract, adjustments as provided in this Section shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by the Government; provided that this limitation shall not be construed to prohibit differences in rents between assisted and comparable unassisted units to the extent that such differences may have existed with respect to the initial Contract Rents." App. to Brief for Petitioners 8a-9a.

B

In the early 1980's, HUD began to suspect that the assistance payments it was making to some landlords under the Section 8 program were well above prevailing market rates for comparable housing. Accordingly, the agency began to conduct independent "comparability studies" in certain real estate markets where it believed that contract rents, adjusted upward by the automatic adjustment factors, were materially out of line with market rents. Under these studies, HUD personnel would select between three and five other apartment buildings they considered comparable to the Section 8 building and compare their rents. The private market rents would then serve as an independent cap limiting the rent payments HUD would make under the Section 8 contracts.

After several landlords brought suit, the Court of Appeals for the Ninth Circuit ruled in 1988 that the standard assistance contracts described above prohibited the use of comparability studies as an independent cap on rents. In Rainier View Associates v. United States, 848 F.2d 988, the Court of Appeals reasoned that HUD, having contracted to increase rents automatically each year based upon a reasonable formula (the second of the two alternative approaches permitted by § 8(c)(2)(A) of the Housing Act, see supra, at 2), could not thereafter limit those increases by means of a market survey (the first of the two statutory alternatives). "Having made its choice," the court wrote, "HUD cannot now change its mind." 848 F.2d, at 991.

After this Court denied certiorari to review the Rainier View decision, 490 U.S. 1066, 109 S.Ct. 2065, 104 L.Ed.2d 630 (1989), HUD made clear its intention not to adhere to that decision's interpretation of its contracts outside the Ninth Circuit. Faced with the prospect of inconsistent application of Government contracts depending solely upon geography, Congress attempted to resolve the matter through amendments to the Housing Act in late 1989. Section 801 of the Department of Housing and Urban Development Reform Act (Reform Act), 103 Stat. 2057, amended § 8(c)(2)(C) of the Housing Act to provide explicitly that...